Accessible Version
Hedge Fund Treasury Exposures, Repo, and Margining, Accessible Data
Figure 1. UST gross exposures
This figure plots the monthly long and short U.S. Treasury notional exposures, in billions USD, of qualifying hedge funds between January 2013 and December 2022, inclusive. Qualifying hedge funds have a net long Treasury exposure throughout. Both long and short Treasury exposure gradually increased between January 2013 and early 2018, and then increased sharply until February 2020, reaching highs of about $1,445 billion and $935 billion, respectively. Long and short exposures abruptly declined in March and April 2020 to about $1,105 billion and $690 billion, respectively. Since then, hedge funds’ Treasury exposures have remained elevated but notably below their pre-pandemic levels. As of December 2022, our last data point, hedge funds’ long Treasury exposures were $1 trillion in December 2022, while their short Treasury exposures stood at $694 billion.
Source: SEC Form PF.
Figure 2. UST balance sheet leverage
This figure depicts the monthly mean leverage ratios of the top 50 hedge funds ranked by gross Treasury exposure, the subset of qualifying hedge funds with Treasury exposures, and the set of all qualifying hedge funds between January 2013 and December 2022. The plot highlights that the top 50 funds were significantly more leverage than the rest of the universe of qualifying hedge funds, on average, and their leverage – measured as the ratio of gross balance sheet assets over net assets – increased markedly since 2018, on net, and remained near historical high levels as of end of 2022 at about 7-to-1. In contrast, balance sheet leverage of the set of all qualifying hedge funds have remained about flat at 2-to-1over the sample period, while balance sheet leverage of the subset of qualifying hedge funds with Treasury exposures increased slightly, on net, over the same period.
Source: SEC Form PF.
Figure 3. Repo borrowing
This figure plots monthly repo borrowing and lending exposures, in billions USD, of qualifying hedge funds between January 2013 and December 2022. The exposures were similar in magnitude until early 2018, after which repo borrowing sharply increased through February 2020, about doubling to $1,465 billion, while repo lending stayed about the same. Repo borrowing decreased about $90 billion in March 2020 and $195 billion in April 2020. Following the March 2020 market turmoil, hedge funds’ repo borrowing has declined somewhat but overall remained elevated by historical standards. More recently, repo borrowing trended up during the last months of 2022, standing at $1.2 trillion at the end of December. Meanwhile, repo lending remained elevated post-pandemic, standing at about $1 trillion in December 2022.
Source: SEC Form PF.
Figure 4. Repo, UST exposure, and leverage by repo haircut
This figure depicts hedge funds’ total repo borrowing, U.S. Treasury gross exposures and average balance sheet ratios (vertical axes) associated with different levels of hedge funds’ repo haircuts (horizontal axis). The plot shows that 73.8 percent (or about $815 billion) of total repo borrowing volume by qualifying hedge funds was transacted at zero or negative haircuts in Q4 2022. In addition, the figure shows that these zero or negative haircuts were associated with elevated leverage, with average balance sheet leverage ratios of funds transacting at zero or negative haircuts significantly higher (ranging between 6.2-to-1 and 9-to-1) than that of the average qualifying (2.1-to-1) at year end 2022.
Note: Data are as of December 2022. Key identifies in order from left to right.
Source: SEC Form PF.